Maple Leafs No. 1 — in value
Team worth $325 million, Forbes says Peddie disputes figures: ‘Not even close’
Maple Leaf Sports and Entertainment president Richard Peddie had a predictable reaction to a Forbes magazine story that has the Maple Leafs awash in money, both in terms of revenues and franchise value.
“ Don’t we wish,” Peddie said. “ It’s not even close, not close at all.”
In its Nov. 28 issue, Forbes reports that the Leafs are the most valuable team in the NHL at $325 million ( all figures U. S., unless otherwise indicated), that their operating income has been $85 million over the past five years and that the 86 per cent increase in the value of the franchise over that time is tops in the league.
Peddie was quick to denounce both the income and franchisevalue numbers, saying Forbes doesn’t have access to MLSE’s or any other organization’s financial numbers. Peddie said the $85 million operating income was a number he didn’t recognize. He said the actual operating profit is much less once you account for taxes and the fact that MLSE pays $27 million ( Cdn.) per year on its debt.
“ When you whittle it all down, the profit is not comparable to the Fortune 500 companies out there at all,” he said. “ This is a thin- profit business — it really is thin. If I were running a big Fortune 500 company, they would be giving me a lot of trouble for how low our bottom line is.”
Forbes acknowledged that it doesn’t have access to the Leafs’ financial reports, but said it conducts numerous interviews with sports bankers and verifies its figures based on recent transactions, such as the sales of the New Jersey Devils, Vancouver Canucks and Mighty Ducks of Anaheim. Michael Ozanian, who co- wrote the piece, said Forbes’ numbers are sound, particularly for franchise value.
“ I had a banker tell me he could find a buyer and sell the Maple Leafs tomorrow for $300 million, so I think $325 million is very reasonable,” Ozanian said. “ We do know that last year, with a lockout looming, the Devils sold for $ 125 million. The guy ( Jeffrey Vanderbeek) paid that knowing he likely wasn’t going to have hockey for a year. Just ask somebody, ‘ What’s a better deal, $325 ( million) for the Maple Leafs, including the revenue they get from the building, or $ 125 million for the Devils?’ ”
Peddie said it’s irrelevant to discuss the value of the Leafs without rolling it into the value of the Air Canada Centre and the Raptors because the organization’s strength is in how all the components fit together. “The interesting question is, what is Maple Leaf Sports and Entertainment worth? — and I
with loads of evidence to back you up that the Leafs never really used their economic strength either well or properly over the past decades anyway. According to The Hockey News, 17 NHL teams are now spending between $34 million and $39 million on player costs, and many of those around the lower figure will add payroll between now and March. Many of those teams are worth less than half of what Forbes says the Leafs are worth. So the best the Leaf operation can do with its wealth is pay a few million more than other clubs for players, not enough to make an enormous difference.
Otherwise, they can spend more than anybody else, if they choose, on executives, coaches, minor- league operations, scouting, trainers, medical support and training facilities. But they can’t go out and buy talent. Or buy a Cup.
Enhancing franchise values is what the lockout was all about, so it’s clear the Leafs emerged as one of the NHL’s big winners. At the other end, the Carolina Hurricanes’ team value, says Forbes, dropped from $100 million to $65 million over the past year, a figure that might suggest that while the Canes are soaring in the standings, they’ll soon be located somewhere else. The increase in the value of the Leafs is fascinating, as most businesses that collected zero income for an entire year would not normally see the value of their business increase. But having fixed costs means a great deal, and so the Leafs, according to Forbes, have increased in value 15 per cent over the past year and 86 per cent over the past five years.
Moreover, it seems the further the club gets from its last Stanley Cup season, the more passionate becomes its fan base and the more popular the team and its “ brand” become. Not being a winner, it seems, hasn’t cost the Leafs a dime.
It’s an impressive record of corporate achievement, a company that has grown spectacularly since the days when folks used to marvel at what a shrewd operator Harold Ballard was while he ran the club for years on a credit card. These MLSE people can’t come within shouting distance of a Cup, but they can build rinks and sell hotdogs and make money and please pension fund managers like nobody else. They can even persuade the city and other levels of government to help build a stadium so they can extend their business into other sports. They now can’t help but make even bigger profits year after year with this famous hockey team. But the Cup remains nowhere in sight.